Industry figures have urged investors to act early if they want to invest in venture capital trusts, because the raft of changes announced last year have reduced fund-raising targets.
Tilney Bestinvest’s managing director for business development Jason Hollands has said fund-raising into VCTs is “cryogenically suspended” as managers work to understand the detail of changes made by the government.
In the Summer Budget, chancellor George Osborne announced that for companies to be eligible for VCT funding, they must have started trading in the past seven years, or 10 years for a ‘knowledge-intensive’ company.
Changes to the Finance Act will also mean there is a £12m cap – or £20m for a knowledge-intensive company – on the amount VCT companies can receive.
However, according to Mr Hollands, the biggest change to the industry is that VCT money can no longer be used to fund management buyouts and acquisitions. He warned that VCT investors are going to have to act earlier than usual this year, due to the smaller amounts of money looking to be raised.
Mr Hollands said: “There is no certainty that the full choice of schemes will be available. These are limited offers, and once a VCT has reached its target then you have missed it. It is first come, first served.
“Until the last couple of months, there has been very little fund-raising,” Mr Hollands said, adding that in the past VCTs had typically started fund-raising from September. He also said that a number of VCTs had held back from completing transactions as they waited for more clarity.
Paul Latham, managing director of Octopus Investments, said there had been some indications that the government will negotiate on this change with the European Commission in order to get it relaxed. He also pointed out that the EU had been the main driver behind the VCT changes, rather than the UK government.
katherine.denham@ft.com
